You are considering purchasing stock. The stock is expected to pay a dividend of
ID: 1226727 • Letter: Y
Question
You are considering purchasing stock. The stock is expected to pay a dividend of $52 per share. The consensus of investors is that these dividends will increase at a rate of 5 percent per year for the indefinite future, and the interest rate is 14 percent. The price of the stock should be_______? Please show work. You are considering purchasing stock. The stock is expected to pay a dividend of $52 per share. The consensus of investors is that these dividends will increase at a rate of 5 percent per year for the indefinite future, and the interest rate is 14 percent. The price of the stock should be_______? Please show work.Explanation / Answer
Price=52/1.14+((52*1.05)/(0.14-0.05))/1.14=577.78